2022 (4) TMI 617 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - notice in the name of company amalgamated - assessment in name of non-existing company - Addition u/s 68 - HELD THAT - The company Savera Marketing Pvt. Ltd. ceased to exist as it was amalgamated with M/s. Shark Packaging (India) Pvt. Ltd. under a scheme of amalgamation approved by the Hon ble Delhi High Court - Amalgamated company namely, M/s. Shark Packaging (India) Pvt. Ltd. vide letter dated 18.06.2011 to the Ld. AO intimated him that M/s. Savera Marketing Pvt. Ltd. ( the assessee) has merged with M/s. Shark Packaging (India) Pvt. Ltd. pursuant to the order dated 21.01.2011 of the Hon ble Delhi High Court and requested him to cancel the PAN allotted to the assessee, M/s. Savera Marketing Pvt. Ltd. Despite this information the Ld. AO proceeded to issue notice under section 148 dated 25.03.2013 in the name of non existing company and continued the reassessment proceedings by issue of statutory notices under section 143(2) and 142(1) also in the name of non-existing company culminating in passing of reassessment order under section 147 read with section 143(3) of the Act on 10.03.2014 We have no hesitation in holding that Ld. AO was not within his jurisdiction to frame the reassessment in the name of non-existing entity and such reassessment order dated 10.03.2014 is nullity and not sustainable in the eye of law. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the initiation of proceedings under Section 147 read with Section 148 of the Income Tax Act, 1961.
2. Validity of reassessment proceedings initiated by the Assessing Officer (AO).
3. Legality of the reassessment order passed in the name of a non-existent entity due to amalgamation.
4. Confirmation of addition under Section 68 of the Act.

Detailed Analysis:

1. Validity of the initiation of proceedings under Section 147 read with Section 148:

The assessee contended that the initiation of proceedings under Section 147 read with Section 148 was invalid as the conditions and procedures prescribed under the statute were not satisfied. The AO issued a notice under Section 148 on 25.03.2013, reopening the case based on information from a post-search investigation that the assessee had received bogus accommodation entries amounting to ?2,10,00,000/- during the assessment year 2006-07.

2. Validity of reassessment proceedings initiated by the Assessing Officer (AO):

The assessee argued that the reassessment proceedings were bad in law because the reasons recorded for issuing the notice under Section 148 were contrary to the facts and did not indicate a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The AO's reassessment order dated 10.03.2014 added ?2,10,00,000/- to the assessee's income under Section 68.

3. Legality of the reassessment order passed in the name of a non-existent entity due to amalgamation:

The assessee merged with another company, effective 01.04.2008, as per the Delhi High Court's order dated 21.01.2011. The AO was informed of this merger by a letter dated 18.06.2011, but continued to issue notices and pass orders in the name of the non-existent entity. The Tribunal noted that any proceeding initiated against a merged non-est entity is illegal and void ab-initio. Citing various judicial precedents, the Tribunal held that the reassessment order dated 10.03.2014 was null and void as it was passed in the name of a non-existent entity.

4. Confirmation of addition under Section 68 of the Act:

The CIT(A) confirmed the AO's addition of ?2,10,00,000/- under Section 68, rejecting the assessee's explanation and evidence regarding the identity and creditworthiness of the shareholder and the genuineness of the transaction. The Tribunal, however, did not adjudicate this issue as it became infructuous due to the quashing of the reassessment order on jurisdictional grounds.

Conclusion:

The Tribunal quashed the reassessment order dated 10.03.2014 passed by the AO and confirmed by the CIT(A) as it was issued in the name of a non-existent entity. The additional grounds raised by the assessee were allowed, and the other grounds were dismissed as infructuous. The Tribunal relied on various judicial precedents to conclude that any assessment framed against a non-existent entity is a jurisdictional defect and void ab-initio.